How to Format the Financial Section of a Business Plan

The financial plan is a key part of your company’s business plan. It not only helps you plan your startup costs and estimate income and expenses, but it is also essential to getting financing from lenders or investors.

The Financial Statement

First, a financial plan should include a financial statement that consists of the following three parts.

  1. Income statement: Also called the profit and loss statement, or P&L, it details the profit or loss the business will generate.
  2. Cash flow statement: Functioning a little like a check register for a checking account, this details the amount of cash coming into and going out of your business.
  3. Balance sheet: This shows the company’s assets and liabilities (debt owed). Assets plus liabilities equal net worth or equity in the business.

How Much Detail?

A startup business should show monthly details in the cash flow and income statements for the first year of business, along with quarterly information for two more years.

Analysis and Budgeting

Most startups should also include a break-even analysis. This shows the amount of revenue you need to recover your startup costs (break even) and start making a profit.

Your financial plan also needs to include a startup and operations budget, showing the total capital needed to start the business and how much you will need to run it. This budget should include things such as wages and salaries, benefits, rent, insurance, equipment, taxes, advertising and marketing expenses, utilities, and the cost of goods sold.

Other Factors to Consider

If you’re using your business plan to look for a loan, you need to specify how much capital you’re looking for, how you plan to use the money and how it will benefit your business, desired terms of the loan, and any collateral you have available. If you’ll be using your business plan to approach angels, venture capitalists, or other equity investors, you need to detail how much capital you are seeking, what you plan to use the money for and how it will help your business, and any additional capital infusions you expect to need in the next five years.

Investors will always want to know your expected return on investment (ROI); they’re typically seeking a high rate of return. Keep in mind that investors or lenders will probably want you to include your personal financial statements as well.

Your accountant, business plan templates, and the many accounting software tools on the market can help you create the financial section of your business plan and determine what you need to include.